Recommendations & Conclusions
31 items
2
Recommendation
Third Report - The future of the Advanc…
Accepted
The estimated cost of decommissioning has nearly doubled since 2004–05 and there remains a significant risk that the costs will rise further. The estimated cost of decommissioning the AGR stations, plus the PWR at Sizewell B, has increased from £12.6 billion in 2004–05 to £23.5 billion in 2020–21 in real …
Government response. The Department, working with the trustees of the Fund, should ensure the estimates make explicit allowance for the risk of optimism bias and report back to the Committee on the new estimates when they are available. They will reflect the …
HM Treasury
3
Conclusion
Third Report - The future of the Advanc…
The terms of the 2009 sale of the nuclear stations agreed by the Department with EDFE placed a disproportionate amount of risk for meeting future decommissioning costs on the taxpayer. The negotiations surrounding the sale of the stations to EDFE in 2009 were focused on maintaining operations, with less attention …
Government response. 3.1 The department agrees with the Committee’s recommendation and will respond by August 2022. Target implementation date: August 2022 3.2 The funded decommissioning plan (FDP) policies in place to support the development of new nuclear stations already build upon what …
HM Treasury
4
Recommendation
Third Report - The future of the Advanc…
EDFE’s timetable for the closure of the stations will result in a significant reduction in the UK’s generating capacity until new capacity comes online. In 2020, nuclear power accounted for 16% of UK electricity generation. The closure of seven nuclear stations by 2028 will therefore have a significant impact. EDFE …
Government response. 4.1 The government disagrees with the Committee’s recommendation as currently drafted, as extensions of the station lifespans are a matter for EDF and the relevant regulator. 4.2 Whilst there has been parliamentary and public interest in the potential for life …
HM Treasury
5
Conclusion
Third Report - The future of the Advanc…
We are not convinced the Department has struck the right balance in incentivising the NDA and EDFE to deliver safe and efficient defueling of the AGR stations on time while reducing costs. The Department has introduced financial incentives to encourage cost-efficient defueling and station transfer with EDFE potentially earning or …
Government response. 5.1 The government agrees with the Committee’s recommendation. Target implementation date: November 2022 5.2 The department accepts the Committee’s recommendation and will respond to the Committee by November 2022, outlining the governance and oversight for monitoring the impact of the …
HM Treasury
6
Conclusion
Third Report - The future of the Advanc…
Arrangements for transferring nuclear stations to NDA are worryingly under- developed, and there is a risk that transfer negotiations between EDFE and NDA could drag on and increase the costs to the taxpayer. The first of the stations could transfer to the NDA as early as 2026. The NDA and …
Government response. 6.1 The government agrees with the Committee’s recommendation. Target implementation date: May 2023 6.2 EDF and NDA are currently working together to deliver detailed transfer plans for the AGR stations, starting with Hunterston B, with an anticipated delivery date of …
HM Treasury
7
Recommendation
Third Report - The future of the Advanc…
Not Addressed
Given the scale and complexity of decommissioning the AGR stations, we are concerned that the Department’s oversight of a complex set of governance arrangements is itself not subject to sufficient scrutiny and challenge. The Department is performing a variety of roles with regard to the decommissioning of the AGRs: it …
Government response. The Clerk of the House and Clerk of Parliament will oversee the programme and manage short-term risks to value for money to avoid nugatory expenditure.
HM Treasury
1
Conclusion
Third Report - The future of the Advanc…
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Business, Energy & Industrial Strategy (the Department), the Nuclear Decommissioning Authority (NDA) and EDF Energy (EDFE) on the decommissioning of the UK’s fleet of Advanced Gas-cooled Reactor (AGR) nuclear power stations.1
Government response. Introduction from the Committee The UK has eight second generation nuclear power stations accounting for around 16% of total UK electricity generation in 2020. These stations are owned by EDF Energy (EDFE) following its purchase of British Energy in 2009. …
HM Treasury
8
Conclusion
Third Report - The future of the Advanc…
The Committee has previously identified significant uncertainty regarding the estimation of decommissioning costs. We examined, for example, the NDA’s management arrangements for decommissioning the Magnox nuclear power stations in 2020 and identified significant difficulties estimating decommissioning costs. We concluded that the NDA did not have a full understanding of the …
Government response. The estimated cost of decommissioning has nearly doubled since 2004–05 and the department agrees that there remains a significant risk that the costs will rise further. Please see response to recommendation 2.
HM Treasury
9
Conclusion
Third Report - The future of the Advanc…
The estimated cost of decommissioning the AGR stations, plus the PWR at Sizewell B, increased from £12.6 billion in 2004–05 to £23.5 billion in 2020–21 in real terms. We asked the Department why the estimated cost of decommissioning the AGRs had increased to such an extent. The Department asserted that …
Government response. The estimated cost of decommissioning has nearly doubled since 2004–05 and the department agrees that there remains a significant risk that the costs will rise further. Please see response to recommendation 2.
HM Treasury
10
Conclusion
Third Report - The future of the Advanc…
There remain significant uncertainties which if managed poorly could increase decommissioning costs further. The estimated cost of defueling the seven stations, for example, ranges between £3.1 billion and £8 billion depending upon how quickly they can be defueled and how soon defueling starts once a station closes after stopping electricity …
Government response. 2: PAC conclusion: The estimated cost of decommissioning has nearly doubled since 2004–05 and there remains a significant risk that the costs will rise further. 2: PAC recommendation: As part of the 2022 revaluation of the decommissioning liabilities, the Department, …
HM Treasury
11
Conclusion
Third Report - The future of the Advanc…
EDFE has recently brought forward the closure date for five out of the seven AGR stations. EDFE told us it expects the stations to stop operating at their current closure dates but acknowledged that early closure was always a risk. Dungeness B was due to close in 2028 but due …
Government response. 2: PAC conclusion: The estimated cost of decommissioning has nearly doubled since 2004–05 and there remains a significant risk that the costs will rise further. 2: PAC recommendation: As part of the 2022 revaluation of the decommissioning liabilities, the Department, …
HM Treasury
12
Conclusion
Third Report - The future of the Advanc…
In 2015, the then Shareholder Executive, on behalf of the Department undertook a review of the arrangements with EDFE for decommissioning the AGR stations. It concluded that the existing agreements did not incentivise EDFE to look at more innovative or cost- effective ways to minimise decommissioning costs. Between late 2017 …
Government response. 5: PAC conclusion: We are not convinced the Department has struck the right balance in incentivising the NDA and EDFE to deliver safe and efficient defueling of the AGR stations on time while reducing costs. 5: PAC recommendation: The Department …
HM Treasury
13
Conclusion
Third Report - The future of the Advanc…
A review commissioned by the Department during the negotiations suggested that the £100 million potential fee might not be enough incentive for EDFE to place greater focus on the AGR stations given the potential value of its other UK interests.20 We therefore queried whether the £100 million financial incentive was …
Government response. 5: PAC conclusion: We are not convinced the Department has struck the right balance in incentivising the NDA and EDFE to deliver safe and efficient defueling of the AGR stations on time while reducing costs. 5: PAC recommendation: The Department …
HM Treasury
14
Conclusion
Third Report - The future of the Advanc…
The Department told us it did have other rights to direct EDFE, for example it has the power to change decommissioning plans. If the Department, for example, identified material cost saving opportunities of more than £5 million it told us it could instruct EDFE to do things in a different …
Government response. The department agrees that it needs to assure itself that the incentives are working and will act accordingly. Please see response to recommendation 5.
HM Treasury
15
Conclusion
Third Report - The future of the Advanc…
The assets of the Fund have been created from the contributions made by the station operators, income from investments, capital injections from government and the proceeds from the sale of the Fund’s shares in British Energy. Despite EDFE extending the operating lives of all the AGR stations, its financial contributions …
Government response. The department agrees that the terms of the 2009 sale of the nuclear stations agreed by the Department with EDFE placed a disproportionate amount of risk for meeting future decommissioning costs on the taxpayer. Please see response to recommendation 3.
HM Treasury
16
Conclusion
Third Report - The future of the Advanc…
We asked why, given the amount of uncertainty surrounding the costs, and concerns about the adequacy of the Fund to cover this, the risks of decommissioning were being entirely borne by the taxpayer. The Department said that the £100 million agreed with EDFE was a meaningful financial incentive to manage, …
Government response. The department agrees that the terms of the 2009 sale of the nuclear stations agreed by the Department with EDFE placed a disproportionate amount of risk for meeting future decommissioning costs on the taxpayer. Please see response to recommendation 3.
HM Treasury
17
Conclusion
Third Report - The future of the Advanc…
The Department emphasised that it was applying significant learning from the experience of decommissioning the Magnox and AGR stations. For new nuclear stations a funded decommissioning plan has to be in place before construction begins. The Department told us that it was “building from the start with decommissioning in mind” …
Government response. 3: PAC conclusion: The terms of the 2009 sale of the nuclear stations agreed by the Department with EDFE placed a disproportionate amount of risk for meeting future decommissioning costs on the taxpayer. 3: PAC recommendation: As proposals for building …
HM Treasury
18
Conclusion
Third Report - The future of the Advanc…
Nuclear power contributed around 16% of the UK’s electricity in 2020. As at January 2022, five of the seven AGR stations and the Pressurised Water Reactor at Sizewell B are the only nuclear power stations in the UK currently generating electricity; two of the AGRs, Dungeness B and Hunterston B, …
Government response. 3: PAC conclusion: The terms of the 2009 sale of the nuclear stations agreed by the Department with EDFE placed a disproportionate amount of risk for meeting future decommissioning costs on the taxpayer. 3: PAC recommendation: As proposals for building …
HM Treasury
19
Conclusion
Third Report - The future of the Advanc…
The Department acknowledged there will be a production gap between existing nuclear stations closing and new ones coming online. However, it told us that it was not concerned about a lack of generating capacity during that period. It told us that the capacity market allowed electricity capacity to be bought …
Government response. 4: PAC conclusion: EDFE’s timetable for the closure of the stations will result in a significant reduction in the UK’s generating capacity until new capacity comes online. 4a: PAC recommendation: The Department working with the Office for Nuclear Regulation, EDFE, …
HM Treasury
20
Conclusion
Third Report - The future of the Advanc…
We asked whether there could be value in reusing the AGR sites, given the existing support in those communities for nuclear power. In particular, we asked the Department what work it was doing to give more clarity to the providers of small modular reactors about potential plans for these sites. …
Government response. 4: PAC conclusion: EDFE’s timetable for the closure of the stations will result in a significant reduction in the UK’s generating capacity until new capacity comes online. 4a: PAC recommendation: The Department working with the Office for Nuclear Regulation, EDFE, …
HM Treasury
21
Conclusion
Third Report - The future of the Advanc…
After the AGR stations are defueled EDFE will transfer the stations to NDA who will be responsible for completing the rest of the decommissioning process. The first 30 Qq 3, 7; C&AG’s Report para 1.2–1.3 31 Qq 3–5 32 Q 7 33 Qq 78–79, 82–83 The future of the Advanced …
Government response. 4b: PAC recommendation: The Department and NDA should publish plans within 12 months setting out how they will make best use of NDA’s nuclear sites in future, including whether they are suitable for new nuclear infrastructure, such as modular reactors. …
HM Treasury
22
Conclusion
Third Report - The future of the Advanc…
There are still some important aspects of transfer that are yet to be agreed. The NDA and EDFE recognise there are issues around transfer that will need to be agreed but believe they have sufficient time to sort out the remaining points.35 They established nine working groups in 2021 to …
Government response. 6: PAC conclusion: Arrangements for transferring nuclear stations to NDA are worryingly under-developed, and there is a risk that transfer negotiations between EDFE and NDA could drag on and increase the costs to the taxpayer. 6: PAC recommendation: Within the …
HM Treasury
23
Conclusion
Third Report - The future of the Advanc…
The Department’s business case estimates that the transfer of the stations will cost £300 million, but given the uncertainties the cost and liabilities could be as large as £1.8 billion. The uncertainties include a potential need to update IT systems, the condition and nature of assets, and the cost of …
Government response. 6: PAC conclusion: Arrangements for transferring nuclear stations to NDA are worryingly under-developed, and there is a risk that transfer negotiations between EDFE and NDA could drag on and increase the costs to the taxpayer. 6: PAC recommendation: Within the …
HM Treasury
24
Conclusion
Third Report - The future of the Advanc…
We were concerned by the number of issues still to be resolved in the time available. We enquired about progress regarding Hunterston B, the first station expected to transfer, especially as discussions around pension contributions can take time to sort out. The witnesses told us they were in discussion as …
Government response. 6.2 EDF and NDA are currently working together to deliver detailed transfer plans for the AGR stations, starting with Hunterston B, with an anticipated delivery date of May 2023. Accordingly, the department would request a revised implementation date for this …
HM Treasury
25
Conclusion
Third Report - The future of the Advanc…
We wrote to the Department and HM Treasury number of times (see Annex 1) after our evidence session and asked it to clarify what it had agreed with EDFE in terms of the land and buildings that will be transferred to the NDA, and how it planned to resolve any …
Government response. 6.2 EDF and NDA are currently working together to deliver detailed transfer plans for the AGR stations, starting with Hunterston B, with an anticipated delivery date of May 2023. Accordingly, the department would request a revised implementation date for this …
HM Treasury
26
Conclusion
Third Report - The future of the Advanc…
The long-term benefits of transferring the AGR stations into public ownership will depend on the ability of Magnox Ltd to deliver efficiencies from combining the stations with its existing portfolio of nuclear stations. The NDA told us it expected to deliver savings once the stations begin to transfer. The addition …
Government response. The department agrees that arrangements for transferring nuclear stations to NDA are worryingly under-developed, and there is a risk that transfer negotiations between EDFE and NDA could drag on and increase the costs to the taxpayer. Please see response to …
HM Treasury
27
Conclusion
Third Report - The future of the Advanc…
Delivering the benefits intended from the new arrangements will require a clear long- term delivery strategy. The current EDFE approach for these stations involves putting reactor buildings into a state of care and maintenance lasting some decades to allow radioactivity levels to decay before starting deconstruction of the reactor. The …
Government response. The department agrees that arrangements for transferring nuclear stations to NDA are worryingly under-developed, and there is a risk that transfer negotiations between EDFE and NDA could drag on and increase the costs to the taxpayer. Please see response to …
HM Treasury
28
Conclusion
Third Report - The future of the Advanc…
The AGR decommissioning programme is complex, and key organisations already have substantial portfolios of work. The NDA, for instance, already has a very heavy workload decommissioning the Magnox fleet and parts of the Sellafield site to which the AGRs will now be added. The NDA’s subsidiary, Magnox Ltd, is currently …
Government response. The department agrees that arrangements for transferring nuclear stations to NDA are worryingly under-developed, and there is a risk that transfer negotiations between EDFE and NDA could drag on and increase the costs to the taxpayer. Please see response to …
HM Treasury
29
Conclusion
Third Report - The future of the Advanc…
The Department told us that following its experience of the Magnox contract, it had undertaken a full review to establish whether it had the right governance and it was now confident that this was the case. It also told us that the NDA has similarly taken “really important steps in …
Government response. Given the scale and complexity of decommissioning the AGR stations, the department agrees that its oversight of a complex set of governance arrangements is itself not subject to sufficient scrutiny and challenge. Please see response to recommendation 7.
HM Treasury
30
Conclusion
Third Report - The future of the Advanc…
Decommissioning the AGR stations is an unusual programme compared with others in government as no single organisation has complete responsibility and authority for performance overall. The success of the programme will depend significantly on the ability of the Department, NDA and EDFE to work together effectively and resolve any problems …
Government response. Given the scale and complexity of decommissioning the AGR stations, the department agrees that its oversight of a complex set of governance arrangements is itself not subject to sufficient scrutiny and challenge. Please see response to recommendation 7.
HM Treasury
31
Conclusion
Third Report - The future of the Advanc…
Given the centrality of its role we asked the Department whether its own role was subject to sufficient scrutiny and whether AGR decommissioning should be included in the Government Major Projects Portfolio. The Department told us that similar concerns had been raised by HM Treasury and Cabinet Office. However, the …
Government response. The government agrees with the Committee’s recommendation. Target implementation date: November 2022 7.2 Monitoring, reporting, and assurance processes and structures were put into place following the agreement of the revised AGR defueling and decommissioning arrangements with Électricité de France Energy …
HM Treasury